The good news: NLY can make money with that money. The bad news: The new issue slices the pie smaller. Please, Sir, may I have some more?
| pps | pfe trend | pfe loc | |
|---|---|---|---|
| NLY |
NLY has been whipsawing madly for months. The three-month chart shows 10 phase changes.
But, a stock with a dividend yield of 14.7% can be forgiven its little quirks and moods. I mean, if we wanted stability, we'd all be on Treasury Direct trading 90-day T-bills for a yield of 0.13%.
NLY's most recent move to bear phase came on Dec. 23 on a downward gap as the stock went ex-dividend. From that day, the price traded sideways for seven market days. Today's news produced another downward gap of 2.5% on nearly 8x volume.
Glad I'm not holding. I jackrabbited last October after the company missed earnings estimates.
At this point, I think reversal levels are pretty meaningless. The drop puts the price below the 20-, 50- and 200-day moving averages. Rather than put up reversal levels now, I'd prefer to wait to see how the new normal behaves.
As a high-yield stock paying quarterly, NLY is best analyzed for and held for the long term. It's a perfect candidate for slow-trading.
On the slow-trading monthly chart, today's move threw NLY into bear phase, but that's unconfirmed.
| pps | pfe trend | pfe loc | |
|---|---|---|---|
| NLY |
The decline remains well within a sideways trend that has been in force since August, and around the middle of a really large sideways t rend that began in June 2001.
Looked at through those glasses, NLY looks like not such a bad deal. Were I holding, as a slow trader I would still get out, based slowly on the unconfirmed phase change. I would wait a bit to see what happened over the short run.
If the stock remained in-range -- say above $16.80 or so near the end of January, then I would re-enter.
The company announces earnings after the close on Feb. 2, and as a trader I would need to decide whether to risk a downside earnings surprise.
Abbreviations:
- pps - Person's Proprietary Signal.
- pfe trend - Trend of the polarized fractal efficiency line.
- pfe loc - Location of the polarized fractal efficiency line.
Key to the PPS/PFE tables
| column | color | meaning |
|---|---|---|
| pps | bull phase | |
| bear phase | ||
| pfe trend | uptrend | |
| no trend | ||
| downtrend | ||
| pfe loc | +100 and above | |
| +50 to below 100 | ||
| 0 to below +50 | ||
| below 0 to above -50 | ||
| -50 to above -100 | ||
| below -100 |
PPS/PFE Analytical Tools
The analysis uses the daily Person's Proprietary Signal (pps), developed by John Person.
This is a black box signals -- the "proprietary" means that Mr. Person knows how it works under the hood, and I don't. But it has shown a fair degree of success in identifying good entry and exit points, and I find it useful.
For confirmation, the analysis uses an indicator called the polarized fractal efficiency (pfe) technical tool. It uses the fractal math of Benoit Mandelbrot to measure how efficiently move between levels. The higher the efficiency, the more directional the price trend.
The math for the pfe is public knowledge, but it is well above my math knowledge, and so to me is also a black-box signal.
This is a relatively new technical tool, based on fractal math. Investopedia has only a cursory explanation. Wikipedia is silent on the subject. ThinkOrSwim has a fuller explanation.
PPS/PFE Trading Rules
These rules are very preliminary. I’m still trying to figure out how the polarized fractal efficiency signal works.
When Person’s Proprietary Signal (pps) is in bull phase, enter when the polarized fractal efficiency (pfe) line crosses the zero line in an uptrend trend) A pps signal and pfe uptrend have less strength but greater upside potential when the pfe location (pfe loc) is below +50, and greater strength but less upside potential when the pfe location is at or above +50.
When the pps in in bear phase, enter when the pfe trend crosses the zero line in a downtrend. The set up has less strength but greater downside potential when the pfe loc is above -50, and greater strength but less downside potential when the pfe loc is at or below -50.
How should the pfe line be treated when it has flatlined at either end of its range, around +100 or -100. My preliminary observations are that the price by then has had a large run and tends to present a picture of exhaustion. However, by the description of the pfe, a high level should indicate a continued strong trend.
This is something that I’ll figure out as I go along.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
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